The following table contains financial information for Fisher Inc. before closing entries:

The following table contains financial information for Fisher Inc. before closing entries:

Cash $ 23,000

Common Stock 34,000

Supplies 4,000

Advertising Expense 2,000

Accounts Payable 20,000

Service Revenue 30,000

Salaries Expense 3,000

Prepaid Rent 4,000

Dividends 3,000

Equipment 45,000

How many of the above accounts are permanent?

A) Three.

B) Four.

C) Five.

D) Six.

Answer: D

Permanent accounts would not include:

A) Accounts Payable.

B) Office Supplies.

C) Utilities Expense.

D) Common Stock.

Answer: C

Permanent accounts would not include:

A) Interest Expense.

B) Salaries Payable.

C) Prepaid Rent.

D) Deferred Revenues.

Answer: A

Which of the following is true concerning temporary and permanent accounts?

A) Cash is a temporary account.

B) Permanent accounts represent activity over the entire life of the company.

C) Permanent accounts must be closed at the end of every reporting period.

D) Temporary accounts represent activity over the previous three years.

Answer: B

Which of the following is a permanent account?

A) Dividends.

B) Service Revenue.

C) Advertising Expense.

D) Retained Earnings.

Answer: D

The purpose of closing entries is to transfer:

A) Accounts Receivable to Retained Earnings when an account is fully paid.

B) Balances in temporary accounts to a permanent account.

C) Inventory to Cost of Goods Sold when merchandise is sold.

D) Assets and liabilities when operations are discontinued.

Answer: B

Which of the following describes the purpose(s) of closing entries?

A) Adjust the balances of asset and liability accounts for unrecorded activity during the period.

B) Transfer the balances of temporary accounts to common stock.

C) Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

D) Transfer the balances of temporary accounts to common stock; reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

Answer: C

The primary purpose of closing entries is to:

A) Prove the equality of the debit and credit entries in the general journal.

B) Ensure that all assets and liabilities are recognized in the appropriate period.

C) Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions.

D) Assure that adjusting entries balance.

Answer: C

The closing process includes which of the following?

A) Closing the balance of the retained earnings account to zero.

B) Closing the balance of only the dividends account to zero.

C) Closing the balances of only revenue and expense accounts to zero.

D) Closing the balances of revenue, expense and dividend accounts to zero.

Answer: D

When a company owes employee salaries at the end of the period but fails to make an adjusting entry for that amount owed, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Current assets in a classified balance sheet are typically listed in order of:

A) Operational functionality.

B) Lowest to highest amount.

C) Importance to the company's profitability.

D) Liquidity.

Answer: D

The liquidity of an asset in a classified balance sheet refers to:

A) The dollar magnitude of the asset.

B) How quickly the asset will be converted to cash.

C) The length of time for which the company has owned the asset.

D) The likelihood that the asset will help to increase the company's profitability.

Answer: B

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect total assets for the current period?

A) Total assets will be too low.

B) Total assets will be correct.

C) Total assets will be too high.

D) Not possible to determine.

Answer: B

If a company incorrectly records Service Revenue too high, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Providing services to customers on account would affect the balances reported in which financial statement(s)?

A) Income statement.

B) Statement of stockholders' equity.

C) Balance sheet.

D) All of the financial statements in the other answers would be affected.

Answer: D

The following table contains financial information for Trumpeter Inc. before closing entries:

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total stockholders' equity?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: B

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total liabilities?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: A

The following table contains financial information for Trumpter Inc. before closing entries:

The following table contains financial information for Trumpter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpter's total assets?

A) $81,500.

B) $82,500.

C) $68,500.

D) $83,500.

Answer: D

Which of the following are reported as stockholders' equity in a classified balance sheet?

A) Debits and Credits.

B) Revenues and Expenses.

C) Common Stock and Retained Earnings.

D) Assets and Liabilities.

Answer: C